Government Incentives When Pollution Permits Are Durable Goods
AbstractThis paper analyzes the incentive effects of pollution taxes versus pollution permits for a budget oriented Government. Pollution permits are analyzed as durable goods, and a pollution tax is seen as being equivalent to leasing out pollution permits. First, a general model is developed, and then four stylized types of Government are discussed (a benevolent dictator, a pure Leviathan, a green and a business-friendly Government). We show that all types of Government prefer a pollution tax system, but this regime is not necessarily the best in social welfare terms. The intuition is that a tax or leasing system makes it easier for the Government to credibly commit to the budget maximizing level of pollution permits which is good for Government revenues, but not necessarily for social welfare. Copyright 2003 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal Public Choice.
Volume (Year): 115 (2003)
Issue (Month): 1-2 (April)
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Web page: http://www.springerlink.com/link.asp?id=100332
Other versions of this item:
- Haucap, Justus & Kirstein, Roland, 2001. "Government Incentives when Pollution Permits are Durable Goods," CSLE Discussion Paper Series 2001-06, Saarland University, CSLE - Center for the Study of Law and Economics.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- K3 - Law and Economics - - Other Substantive Areas of Law
- D7 - Microeconomics - - Analysis of Collective Decision-Making
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